In the end, said ITV's new executive chairman, it came down to blood. Arriving at ITV's Network Centre to a rapturous reception from staff, Michael Grade said yesterday his "emotional ties" to ITV and the chance to restore the ailing broadcaster to former glories had persuaded him to walk out on his role as BBC chairman just weeks before a crucial government decision on the level of the licence fee.

A pay package unveiled yesterday that is potentially worth more than £8.5m over three years - a considerable improvement on the £82,946 he got last year as BBC chairman - cannot have hurt either. Receiving a standing ovation as he entered ITV's glass and chrome headquarters in London, Mr Grade explained how the challenge of returning to the broadcaster that his uncle, Lord (Lew) Grade, helped to establish from scratch in 1955 was too tempting to turn down.

"I'm reeling from the reaction from the staff. ITV is one of the great British broadcasters and a national brand in every sense," he said. "The job is to move it forward and accelerate its growth. I can't wait to get started."

He admitted that he faced a big task to turn around ITV, which has suffered from chronic under-investment in programming, a confused digital strategy and increased competition from digital channels and the internet.

Whereas the BBC has managed to reinvent its drama output, for example, with innovative and popular fare such as Bleak House, Spooks and Doctor Who, ITV has relied on its soaps, crime thrillers and hoary favourites like Heartbeat. Despite recent signs of creative renewal, thanks to a new team put together by director of television Simon Shaps, it remained locked in a spiral of declining ratings and advertising revenues as it has lost touch with its core middle class audience.

Mr Grade's arrival, news of which stunned ITV staff, shareholders and industry observers when it leaked on Monday night, was negotiated in just a week by outgoing ITV chairman Sir Peter Burt, it emerged yesterday.

Sir Peter, who came under fire from shareholders for appearing directionless in his attempts to find a chief executive after Charles Allen was forced to fall on his sword in August, broached the idea in September. The pair met regularly, said Mr Grade, because of their roles at the BBC and ITV. "Back in September we had one of our regular meetings and he floated the idea that one day he might want to step back from ITV," Mr Grade said. "I was very flattered but explained I couldn't possibly consider anything before the licence fee settlement was decided."

But when Mr Grade was offered a new job combining the chairman and chief executive's roles, it was too good to refuse. "During the course of last week, the board made a fresh approach and the best thing to do was to go public as fast as possible," Mr Grade said.

Sir Peter admitted that ITV's challenges were "considerable", adding: "I regard it as a real coup to have persuaded Michael to join us." Those close to Mr Grade said the huge financial incentives were "clearly a motivation". He has a young family and missed out on the millions made by other former ITV executives in the 1980s because he left for Hollywood and then joined the BBC.

Mr Grade, who has now held senior positions at the three biggest broadcasters in Britain, said conversations with his family had persuaded him to abandon his latest role at the BBC. His aunt recently told him that his Uncle Lew would have been 100 on Christmas Day.

"That pulled me up with a start last night because it made me realise just what an emotional hold ITV has on me. It gave me my first chance in TV in 1973 and I left in 1981. I'm grateful for the opportunity to come back - nobody likes to see an organisation they care so deeply about in a situation of such uncertainty."

At BBC TV Centre in White City and in Whitehall, the mood was more subdued. Mr Grade, who became one of the few broadcasting executives equally well known to public and industry, said the furore surrounding his defection reminded him of the last time he quit the BBC. In 1987, he fell out with then director general John Birt and joined Channel 4 as chief executive.

"Reading some of the stuff this morning and getting some of these questions, I get a sense of deja vu." Channel 4's deputy chairman at the time, Sir George Russell, is now in the same role at ITV.

In an emotional email to BBC staff, Mr Grade gave the reasons for his departure. "Looking back over the past two-and-a-half years, I can say I have never felt so privileged, never felt such a responsibility, and never felt so proud. I am off to a new challenge, maybe at 63 my last real job, and hopefully give you a run for your money. That's how it should be. Look after Auntie, I am sure you won't need me again."

Mr Grade will take up the ITV job in January and said his immediate priority would be to invest more money in programmes and use his expertise to guide the creative team, giving them time to reverse the slide in ratings.

He wanted to remove the uncertainty that had clouded ITV's future, concentrating on programmes and people. He would deal with BSkyB, the pay TV group chaired by Rupert Murdoch that amassed an 18% stake in ITV to block a potential takeover by NTL, like "any other shareholder".

"Uncertainty and creative confidence do not go together. It's a matter of getting ITV back to what it has been: the most loved, the most relevant, the most creative broadcaster."

Eight who might take top BBC jobLineup of likely candidates

Lord Puttnam

A successful film-maker, he is currently the Channel 4 deputy chairman and was the New Labour peer who headed the parliamentary committee that scrutinised the 2003 communications bill.

David Dimbleby

Lost out to Michael Grade for the chairmanship in 2004. He is still making programmes for the BBC, having chaired Question Time since 1994.

Richard Lambert

The director general of the CBI, he was asked by the Department for Culture, Media and Sport to write an independent review on BBC News 24 in 2002. He spent a decade as editor of the Financial Times.

Richard Eyre

A former ITV chief executive who is now chairman of RDF Media.

David Liddiment

A member of the BBC Trust and former ITV director of television, Liddiment is now director of the independent producer All3Media and Kevin Spacey's Old Vic producer.

Dame Patricia Hodgson

Chief executive of the former television watchdog, the Independent Television Commission, spent 30 years in the BBC, ending with a stint as John Birt's head of policy. Member of the BBC Trust.

Lord Burns

Headed the government's independent panel on the BBC charter review, which recommended the board of governors should be scrapped and replaced with a new independent body, the public service broadcasting commission.

Chris Patten

The former Conservative minister has had a string of top jobs since losing his seat at the 1992 election, including being the last governor of Hong Kong. He is now chancellor of Oxford University.